Merchant Banking Meaning
Merchant Banking is a combination of Banking in addition to consultancy services. It provides consultancy to its clients for financial, marketing, managerial in addition to legal matters. Consultancy agency to supply advice, guidance in addition to service for a fee. It helps a human of affairs to commence a business. It helps to enhance (collect) finance. It helps to expand in addition to modernize the business. It helps inwards restructuring of a business. It helps to revive sick concern units. It too helps companies to register, purchase in addition to sell shares at the stock exchange.
In short, merchant banking provides a broad make of services for starting until running a business. It acts equally Financial Engineer for a business.
Image credits © Prof. Mudit Katyani.
Merchant banking was commencement started inwards Republic of Republic of India inwards 1967 yesteryear Grindlays Bank. It has made rapid progress since 1970.
Functions of Merchant Banking
The of import functions of merchant banking are depicted below.
The functions of merchant banking are listed equally follows:
- Raising Finance for Clients : Merchant Banking helps its clients to enhance finance through upshot of shares, debentures, banking concern loans, etc. It helps its clients to enhance finance from the domestic in addition to international market. This finance is used for starting a novel concern or projection or for modernization or expansion of the business.
- Broker inwards Stock Exchange : Merchant bankers human activity equally brokers inwards the stock exchange. They purchase in addition to sell shares on behalf of their clients. They acquit question on equity shares. They too suggest their clients nearly which shares to buy, when to buy, how much to purchase in addition to when to sell. Large brokers, Mutual Funds, Venture capital companies in addition to Investment Banks offering merchant banking services.
- Project Management : Merchant bankers assistance their clients inwards the many ways. For e.g. Advising nearly place of a project, preparing a projection report, conducting feasibility studies, making a excogitation for financing the project, finding out sources of finance, advising nearly concessions in addition to incentives from the government.
- Advice on Expansion in addition to Modernization : Merchant bankers hand advice for expansion in addition to modernization of the concern units. They hand skilful advice on mergers in addition to amalgamations, acquisition in addition to takeovers, diversification of business, unusual collaborations in addition to joint-ventures, technology up-gradation, etc.
- Managing Public Issue of Companies : Merchant banking concern advice in addition to deal the populace upshot of companies. They supply next services:
- Advise on the timing of the populace issue.
- Advise on the size in addition to cost of the issue.
- Acting equally director to the issue, in addition to helping inwards accepting applications in addition to resources allotment of securities.
- Help inwards appointing underwriters in addition to brokers to the issue.
- Listing of shares on the stock exchange, etc.
- Handling Government Consent for Industrial Projects : H5N1 human of affairs has to larn regime permission for starting of the project. Similarly, a society requires permission for expansion or modernization activities. For this, many formalities conduct maintain to hold upwardly completed. Merchant banks practice all this piece of occupation for their clients.
- Special Assistance to Small Companies in addition to Entrepreneurs : Merchant banks suggest pocket-size companies nearly concern opportunities, regime policies, incentives in addition to concessions available. It too helps them to convey payoff of these opportunities, concessions, etc.
- Services to Public Sector Units : Merchant banks offering many services to populace sector units in addition to populace utilities. They assistance inwards raising long-term capital, marketing of securities, unusual collaborations in addition to arranging long-term finance from term lending institutions.
- Revival of Sick Industrial Units : Merchant banks assistance to revive (cure) sick industrial units. It negotiates amongst dissimilar agencies similar banks, term lending institutions, in addition to BIFR (Board for Industrial in addition to Financial Reconstruction). It too plans in addition to executes the amount revival package.
- Portfolio Management : H5N1 merchant banking concern manages the portfolios (investments) of its clients. This makes investments safe, liquid in addition to profitable for the client. It offers skilful guidance to its clients for taking investment decisions.
- Corporate Restructuring : It includes mergers or acquisitions of existing concern units, sale of existing unit of measurement or disinvestment. This requires proper negotiations, training of documents in addition to completion of legal formalities. Merchant bankers offering all these services to their clients.
- Money Market Operation : Merchant bankers bargain amongst in addition to underwrite short-term money market instruments, such as:
- Government Bonds.
- Certificate of deposit issued yesteryear banks in addition to fiscal institutions.
- Commercial newspaper issued yesteryear large corporate firms.
- Treasury bills issued yesteryear the Government (Here inwards Republic of Republic of India yesteryear RBI).
- Leasing Services : Merchant bankers too assistance inwards leasing services. Lease is a contract betwixt the lessor in addition to lessee, whereby the lessor allows the usage of his specific property such equally equipment yesteryear the lessee for a for sure period. The lessor charges a fee called rentals.
- Management of Interest in addition to Dividend : Merchant bankers assistance their clients inwards the management of involvement on debentures / loans, in addition to dividend on shares. They too suggest their customer nearly the timing (interim / yearly) in addition to charge per unit of measurement of dividend.
